kiplinger connection
Taxes • Global Business • Traffic Fees

Taxes: Some upcoming business tax breaks.
Global Business: Russian oil money headed here.
Traffic Fees: Pay a toll to drive downtown?

Taxes
Businesses can look forward to a series of new tax breaks soon.
They’re intended to help offset a $2.10 hike in the minimum wage
to $7.25 an hour, which Congress will pass at the same time. They include:
Higher expensing for small businesses. The current $112,000 cap will be raised to $125,000 for 2007 and indexed to inflation after that.
A juicier work opportunity credit. Lawmakers will extend it through 2011, make it cover more disadvantaged veterans and others, and allow the credit to be applied against the alternative minimum tax.
Relaxed rules on S firms, so that gains on the sales of securities are not considered passive income and S corporation banks get relief.
But note that tougher kiddie tax rules will hurt some taxpayers. Long-term capital gains for dependents over age 18 will be taxed at 15%. Retroactive to Jan. 1, 2007, they will no longer get the special 5% rate.

Global Business
Despite increasing restrictions on foreign investment …
There’s plenty of money to be made in Russia these days. An upcoming new law limits outside investment in energy, aircraft, and shipbuilding and other strategic sectors but isn’t much of a worry. Similar curbs are common in other countries. And they may even help, reassuring investors by making it clear where the Kremlin draws the line.
Industries attracting new investment interest: Biotechnology, chemicals, architectural glass, bathroom fixtures, and "white goods" ... washing machines, refrigerators, and other major household appliances.
Moscow's desire to buy U.S. assets is also on the rise. The Kremlin intends to pour some of its ample oil revenues into the U.S., leveraging Russia’s energy superpower into economic muscle. To do so, it’s setting up new government investment funds of over $100 billion.
It will stake claims in real estate, high-tech and energy firms in coming years but at first is likely to focus on government bonds.

Beijing is on a similar mission. The Chinese government is looking for more return on some of its $1 trillion in foreign currency holdings. Some of the $300 billion put into a new government investment fund will go to secure supplies of oil and other critical natural resources in Africa and elsewhere. But China also wants to purchase U.S. companies, particularly well-known brand names with ready-made distribution networks, following the path trod in Lenovo’s 2005 purchase of IBM’s PC division.

Meanwhile, foreigners are less inclined to buy U.S. debt, reflecting a shift in interest rate differentials. While the yield on 10-year Treasuries dipped from just over 5% a year ago to 4.7% now, the rate on the equivalent British bond rose 50 basis points to 5.06%. Over the same span, the yield on Germany’s 10-year bond increased to 4.2%. Foreign buying of long-term U.S. Treasuries is about $16 billion a month on average this year, down from $23.5 billion over the past 12 months.
That’s one more slight upward pressure on long-term U.S. rates.

Nuclear industry sales to India are likely to wait until 2009.
Politics ... here and in India ... will delay a pending trade pact that would let the U.S. sell nuclear fuel and technology to that nation. India’s government is under pressure to push for more concessions. Bush wouldn’t mind giving them but can’t ... they’d require changes in law by Congress. And Democrats aren’t inclined to lift further restrictions on nuclear trade just to hand Bush a victory before the 2008 elections.

Traffic Fees
London has them. So do Singapore, Melbourne, and Oslo.
But traffic congestion fees in U.S. cities are still years off, even in New York City, where Mayor Michael Bloomberg is pushing for them. On weekdays, about 831,000 vehicles now crisscross Manhattan. By 2010, 860,000 will do so. Bloomberg wants stiff new fees slapped on vehicles that enter Manhattan’s central business district (south of 86th Street). Others mulling similar plans: Seattle, San Francisco, and Washington, D.C.
Logistics, not to mention politics, will take years to untangle.